Can We Trust The Banks Anymore ?

[EDDIE51]

With the news from Cyprus that 30% of deposits over 100,000 euros will be confiscated, and that ''this will be the precedent for future bailouts''
Can anyone trust a Bank again ?

[bibblebub]

the guy with money in the bank will lose 30% of 50,000€ (150,000€ -100,000€), i.e. 15,000€, not 45,000€

[sandyRoe]

Connie, what do you mean by a safe safe? Something in your own home? That's not a good idea.
I would leave my money in ISAs or other saving accounts.

[factor-fiction]

Hi Connemarra- I mean that if the banks collapsed, people's savings had been wiped out and governments couldn't afford to pay compensation, the whole economy would be in tatters, police and public sector workers wouldn't get paid, shops etc wouldn't be able to trade, lawlessness would break out, and money under the bed may no longer help

[Connemmara]

Ah well leave it where it is - as long as I get my capital back - we are all in the same boat. There is something to be said for the oul critters who haven't a halfpenny. But they just get on with it.

[New Judge]

Bear in mind that the whole of the EU (including Cyprus) is party to the €100,000 bank guarantee scheme. A couple of weeks ago the first proposal to deal with the Cypriot baleout involved a levy of 6.75% on deposits below that limit which effectively rendered the guarantee worthless. The Cypriot government (no doubt aided and abetted by the EU) tried to deny that was the case by saying that the levy was a tax rather than a loss of deposits due to insolvency which the guarantee was designed to cover. What intrigues me now (and something which has not been satisfactorly explained) is that when the earlier proposals were put forward the Cyprus MPs had a vote on the matter and soundly rejected the proposal. As a condition for this latest scheme to be acceptable to the EU and the IMF (which involves taking near enough the same amount of money from depositors) it apparently must not be voted on. And when the EU is accused of being an undemocratic organisation hands go up in astonishment!

But back to EDDIE’s question: I think trust in individual banks across Europe must be variable. Even though they are all subscribers to the guarantee scheme, as factor says, if a major bank in a major European economy goes belly up it will be very difficult for the government of that country to find the funds to reimburse savers. Of course the root cause of all these problems is excessive borrowing (both personal and national) across the continent. Banks depend for their livelihood on lending money to people, getting it back as agreed and not having to ask for it all back at short notice. In particular the euro encouraged smaller nations to borrow money at low interest rates in a currency they could not afford to use. These problems will persist whilst the flawed single currency continues to be used by the smaller economies and the deal reached for Cyprus will do them, all of the Euro zone and the wider world no favours whatsoever.

[emmie]

i was under the impression that even if your funds were spread over several banks, that if those banks are affiliated, you would only get the one lot of help, is that right or not?

[emmie]

interesting reading, the part about our banking system is down the page

http://www.thisismoney.co.uk/money/saving/article-1623147/Safe-savings-advice-Compensation-rules.html

[New Judge]

Yes, em. The table provided in your linked article shows the brands covered by each licence. Only one lot of £85k is guaranteed per licence. So for example, the following “brands” all sell products under the Bank of Scotland’s licence:

AA Financial Services
Aviva
Bank of Scotland
BM Savings
Birmingham Midshires
Halifax
Intelligent Finance
Saga

So, if you had £85k in two or three of them and the Bank of Scotland went skint you would only be covered for £85k in total.

[mrs_overall]

Does this mean my life savings of £3.75 are safe in the bank?

[emmie]

no, suggest take it out now and invest in large bar of chocolate, distribute it amongst your kin, or not..

[emmie]

NJ, that is what i thought, so if the affiliated banks go belly up you could stand to lose a packet, being only covered up to 85K for the one, what a flaming swizz.

[emmie]

by the way the deal is slightly better if you are a couple?

[New Judge]

Yes it is twice as good for joint account holders. Joint account holders have a guarantee of £85k each.

[sandyRoe]

I can see now that my being poor has its advantages. I have no money worries, nor worries that my bank could collapse.

[New Judge]

By the way, mrs_o, be careful if you do squander your savings on chocolate and give it away as em has suggested. If you need residential care in the near future your local authority may decide that you have deliberately deprived yourself of these assets with a view to avoid having to pay for your care. Better to keep the chocolate yourself as you may need it when you go into a home.

[emmie]

what as a bribe, that wouldn't be right now would it, fancy a judge suggesting such a thing x x

[EDDIE51]

My point is that where 10 years ago the idea of a major bank going 'Belly Up' was unthinkable that is no longer the case. Remember the share trading scandals that very nearly brought down major financial institutions?
I know people in Cyprus and they all say that as soon as they possibly can they will withdraw all their cash and either keep it 'under the mattress ' or buy Gold with it.
I looked at the Gold price this morning $1610 per oz ! and showing no sign of even levelling out let alone dropping.

[emmie]

Eddie, which is what i say some time back, invest in gold, however what is going to happen to the staff of the banks they are disbanding, and then all the businesses that have relied on the high rollers that have kept them in business. Hotels, bars, restaurants and so forth, this is a domino effect, push one over and the whole lot will come crashing down.

[DangerUXD]

some here are mixing 2 very different things. The Cypriot governement was effectively forced to come up with some money they chose to do it by stealing from their public. The Banks had no hand in that. The subject of banks collapsing is largely irrelevant. If a major retail bank ever allowed to collapse then that would have us all back in caves money would be irrelevant that's why the banks where bailed out in 2007-8 crises they could not afford not to. The figure for guarenteed deposits is totally pointless. This is not a question of whether banks are trust worthy, they wouldn't/couldn't take money off their own bat.

[EDDIE51]

I realise it was the Government / EU not the banks but the principle is the same.
A precedent has been set and it can happen again, next time it could be all deposits that get raided, the £85,000 guarantee is now effectively worthless. What would happen if Italy had to be bailed out for example ?